IGI Logo

Strong potential for growth; Upgrade to BUY  

Result Highlights ‐Inline with estimates   

* 1QFY22 Profitability:  

The EBITDA and PAT for the quarter stood at Rs 3.81bn (+356% YoY; ‐22% QoQ) and Rs 2.44bn (+667%YoY; ‐26% QoQ); YoY growth was primarily on account of base effect ; however sequential decline stemmed from impact of Covid‐2nd wave.

* Gross Margin:

The gross margin for the quarter stood sequentially higher at Rs 14.4/scm (4Q: Rs 13.6/scm), on full flow through of price increase undertaken in Mar’21. However, the same was offset by higher per unit operating cost at Rs 6.5/scm (4Q: Rs 5.6/scm) due to lower gas sales.

* EBITDA per unit:

The EBITDA per unit stood at a strong Rs 7.87/scm (4Q: Rs 8/scm), broadly flat QoQ and in‐line with our estimates, primarily as expansion in gross margin to Rs 14.4/scm (4Q: Rs 13.6/scm) was offset by higher per unit operating cost at Rs 6.5/scm (4Q: Rs 5.6/scm); even as material cost at Rs 11.6/scm, stood flat QoQ.

* Gas Sales:

The total gas sales during the quarter stood at 5.32mmscmd (CNG: 3.65mmscmd; PNG: 1.67mmscmd), which is about 95% higher on YoY but 22% lower on QoQ basis. The sequential drop in sales was due to lockdown during Covid‐2nd wave. However, sales normalized Jun’21 onwards and as we write gas sales is already close to ~7mmscmd, even though school busses are still not operating.

* Infrastructure development:

While Covid  ‐2nd wave halted the roll out of new CNG stations, but IGL nevertheless continued to invest in infrastructure development, incurring a capex of Rs 3bn during 1QFY22.    The capex would fructify 2QFY22 onwards, with commissioning of under‐construction CNG stations; as IGL aims to add ~100 new station over FY22.

View & Valuation

The 1QFY22 earnings were in line with our estimates. As expected, while the gas sales were affected by Covid‐2nd wave, the impact was still less severe than the one seen last year in the June quarter. The gas sale declined by 22% QoQ to 5.32mmscmd, vs 2.73mmscmd in 1QFY21(‐56% QoQ). As we write, the gas sales have already recovered to ~ 7mmsmcd, which is higher than 4QFY21, even though school busses are still not operational. A reopening of schools when conditions normalize should contribute additional volumes.  

As per our understanding, IGL has multiple growth triggers: a) wide differential between CNG  and Petrol prices has prompted a conscious shift towards CNG cars, with several OEMs now launching CNG models, leading to addition of more than 10000 vehicles p.m. b) the area of Gurgaon which was allocated to IGL few quarters back (Nov’18) is an area of significant potential, however growth is stilted,  pending complete  handover from HCGDL, c) in addition, IGL has 10 GAs under its belt in total, where significant gas sales traction is expected, especially  in new GAs (other than NCR).  

We therefore upgrade IGL to BUY (from ADD) with a revised target price of Rs 620/sh (from Rs 595/sh) as we roll estimates forward and move to Mar’23 target (from Mar’22).  

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer